💸 Crop Loan

Crop Loan Scheme

• Crop loan scheme was one of the recommendations of All India Rural Credit Survey Committee 1954 and the V.L. Mehra Committee on Co-operative Credit (1960) recommended the adoption of crop loan system in all the States.
• After a lapse of five years this was introduced in the country during 1965 and in Andhra Pradesh from Kharif, 1966.
• The scheme has been implemented with the twin objectives of treating crop as security instead of landed property and fixing the scale of finance depending upon the actual farm expenditure (Variable cost).

Agricultural Credit

• Agricultural Credit flow has increased consistently over the years and it reached Rs 11,68,503 crore against the target of Rs 10,00,000 crore during 2017-18.
• Target for the year 2021-22 has been fixed at Rs 16.5 lakh crore.

Kisan Credit Card Scheme (KCC)

• Kishan Credit Card (KCC) scheme was introduced in the budget for the year 1998 by then finance minister Mr Yashwant Sinha and it was implemented in the month of August of the same year. Kishan Credit Card scheme was introduced to provide short-term credit/crop loan to farmers on the basis of their land holdings so that farmers can purchase required inputs on time such as seeds, fertilizers, pesticides etc. This helps small and marginal farmers to avoid the route of very high-interest loans from unorganized sector to meet their need of working capital and input costs.
• Before giving loans to farmers, a credit limit is assigned to them depending upon the landholding, crops sown etc. and an ATM-cum credit card is provided to him/her to use it to withdraw cash, to pay at Point of Sale (PoS) terminal while buying seeds, fertilizers, pesticides etc.
• Model scheme prepared by NABARD on recommendations of R.V. Gupta committee.
• First bank launched KCC: SBI
• Ensuring hassle-free credit availability at a cheaper rate to farmers has been the top priority of the Government of India. Accordingly, the Kisan Credit Card Scheme (KCC) was introduced for farmers to empower them to purchase agricultural products and services on credit at any time.
• As of 30 December, 2022, banks issued Kisan Credit Cards (KCC) to 3.89 crore eligible farmers with a KCC limit of ₹4,51,672 crore.

Objective

• The scheme aims at providing adequate and timely credit for the comprehensive credit requirements of farmers under single window for their cultivation and other needs as indicated below:
  • To meet the short-term credit requirements for cultivation of crops
  • Post-harvest expenses
  • Produce Marketing loan
  • Consumption requirements of farmer household
  • Working capital for maintenance of farm assets, activities allied to agriculture, like dairy animals, inland fishery and also working capital required for floriculture, horticulture etc.
  • Investment credit requirement for agriculture and allied activities like pump sets, sprayers, dairy animals, floriculture, horticulture etc.
  • Short term credit requirements of rearing of animals, birds, fish, shrimp, other aquatic organisms, capture of fish.

Eligibility

• All farmers-individuals/Joint borrowers who are owner cultivators.
• Tenant farmers, Oral lessees and Share Croppers etc.
• SHGs or Joint Liability Groups (SHGs) of farmers including tenant farmers, share croppers etc.,
• The criteria for eligible beneficiaries under KCC for Animal Husbandry and Fisheries are as follows:

Fishery

• Inland Fisheries and Aquaculture - Fishers, Fish Farmers (individual & groups/ partners/ share croppers/ tenant farmers), Self Help Groups, Joint Liability Groups and women groups. The beneficiaries must own or lease any of the fisheries related activities such as pond, tank, open water bodies, raceway, hatchery, rearing unit, possess necessary license for fish farming and fishing related activities, and any other State specific fisheries and allied activities.
• Marine Fisheries - Beneficiaries listed above, who own or lease registered fishing vessel/boat, possess necessary fishing license/permission for fishing in estuary and sea, fish farming/mariculture activities in estuaries and open sea and any other State specific fisheries and allied activities.

Animal Husbandry

• Poultry and small ruminant - Farmers, poultry farmers either individual or joint borrower, Joint Liability Groups or Self-Help Groups including tenant farmer of sheep/goats/pigs/poultry/birds/rabbit and having owned/rented/leased sheds.
• Dairy - Farmers and Dairy farmers either individual or joint borrower, Joint Liability Groups or Self-Help Groups including tenant farmers having owned /rented/leased sheds.
• With the Government of India extending the KCC facility to fisheries and animal husbandry farmers in 2018-19, the number of such cards in the fisheries and animal husbandry sector has also grown.
• As of 17 October 2022, 1.0 lakh KCCs have been sanctioned for the fisheries sector and 9.5 lakh (as of 4 November 2022) for the animal husbandry sector.

Loan amount

👉🏻 All farmers other than marginal farmers For farmers raising single crop in a year

• Short term credit limit is fixed for the first year depending upon
  • the crops cultivated as per proposed cropping pattern & scale of finance
  • post-harvest/ household / consumption requirements
• Maintenance expenses of farm assets, crop insurance, Personal Accident Insurance Scheme (PAIS) and Asset insurance.
• Scale of finance for the crop (as decided by District Level Technical Committee) x Extent of area cultivated + 10% of limit towards post-harvest / household / consumption requirements + 20% of limit towards repairs and maintenance expenses of farm assets + crop insurance, PAIS & asset insurance.
• For every successive year (2nd, 3rd, 4th, and 5th year), the limit will be stepped up @10%.

👉🏻 For farmers raising more than one crop

• For farmers raising more than one crop in a year, the limit is to be fixed as above depending upon the crops cultivated as per proposed cropping pattern for the first year and an additional 10% of the limit towards cost escalation / increase in scale of finance for every successive year (2nd, 3rd, 4th and 5th year).
• It is assumed that the farmer adopts the same cropping pattern for the remaining four years also. In case the cropping pattern adopted by the farmer is changed in the subsequent year, the limit may be reworked.

Term loans

• Term loans for investments towards land development, minor irrigation, purchase of farm equipment and allied agricultural activities.
• The banks may fix the quantum of credit for term and working capital limit for agricultural and allied activities, etc., based on the unit cost of the asset/s proposed to be acquired by the farmer, the allied activities already being undertaken on the farm, the bank’s judgment on repayment capacity vis-a-vis total loan burden devolving on the farmer, including existing loan obligations.
• The long-term loan limit is based on the proposed investments during the five-year period and the bank’s perception on the repaying capacity of the farmer.

Maximum Permissible Limit

• The short-term loan limit arrived for the 5th year plus the estimated long-term loan requirement will be the Maximum Permissible Limit (MPL) and treated as the Kisan Credit Card Limit.

👉🏻 For Marginal Farmers

• A flexible limit of Rs. 10,000 to Rs. 50,000 be provided (as Flexi KCC) based on the land holding and crops grown including post-harvest warehouse storage related credit needs and other farm expenses, consumption needs, etc., plus small term loan investments like purchase of farm equipment, establishing mini dairy/backyard poultry as per assessment of Branch Manager without relating it to the value of land.
• The composite KCC limit is to be fixed for a period of five years on this basis. Wherever higher limit is required due to change in cropping pattern and/or scale of finance, the limit may be arrived at as per the estimation.

For Animal Husbandry and Fisheries

• The scale of finance will be fixed by the District Level Technical Committee (DLTC) based on local cost worked out on the basis of per acre/per unit/per animal/per bird etc.
• The working capital components in fisheries, under the scale of finance, may include recurring cost towards seed, feed, organic and inorganic fertilisers, lime/other soil conditioners, harvesting and marketing charges, fuel/electricity charges, labour, lease rent (if leased water area) etc. For capture fisheries, working capital may include the cost of fuel, ice, labouring charges, mooring/landing charges etc. may form part of the scale of finance.
• The working capital components in Animal Husbandry, under the scale of finance, may include recurring cost towards feeding, veterinary aid, labour, water and electricity supply.

Disbursement

• The short-term component of the KCC limit is in the nature of revolving cash credit facility. There should be no restriction in number of debits and credits. The drawing limit for the current season/year could be allowed to be drawn using any of the following delivery channels.
  • Operations through branch
  • Operations using Cheque facility
  • Withdrawal through ATM / Debit cards
  • Operations through Business Correspondents and ultra-thin branches
  • Operation through PoS available in Sugar Mills/ Contract farming companies, etc., especially for tie- up advances
  • Operations through PoS available with input dealers
  • Mobile based transfer transactions at agricultural input dealers and mandies.

Interest Rate

• To ensure that the farmers pay a minimal interest rate to the banks, the Government of India has introduced the Interest Subvention Scheme (ISS). This scheme was restructured in 2022 to the Modified Interest Subvention Scheme, to provide short-term credit to farmers at subsidised interest rates.
• The interest levied on the loan under KCC scheme is around 7 per cent simple interest ^{IBPS 2018} per annum up to 3 lakhs to farmers engaged in Agriculture and other Allied activities, including Animal Husbandry, Dairying, Poultry, Fisheries etc.
• In case of non-repayment within the due dates, interest is applied at card rate and beyond due date interest will be compounded half yearly.
• Interest subvention of 2 % to banks and 3 % to farmers towards Prompt Repayment incentive is extended on short-term loans up to Rs 2 lakh ^{NABARD 2021} to animal husbandry and fisheries farmers apart from the existing KCC for crop loans, provided the loans are extended by banks @7% per annum. In case of farmers possessing KCC for raising crops and involved in activities related to Animal Husbandry and/ or Fisheries, the Interest Subvention on short-term loan is available on an overall limit of Rs.3 lakh per annum.
• Therefore, if a farmer repays his loan on time, he gets credit at 4 per cent per annum.
• The GoI has extended the Interest subvention Scheme on KCC issued to crop loan farmers to the KCC issued to Animal Husbandry and Fisheries farmers from 2018-19.
• As a result of the initiatives taken and the measures to strengthen existing policies, there has been a consistent increase in the agriculture credit flow over the years, exceeding the target every year for the past several years. In 2021-22 also, it was about 13 per cent more than the target of ₹16.5 lakh crore. The target for the flow of credit to agriculture for 2022-23 has been fixed at ₹18.5 lakh crore.
• In this year’s budget the agriculture credit target will be increased to ₹ 20 lakh crore with focus on animal husbandry, dairy and fisheries.

Repayment Period

• The repayment period for short terms loans may be fixed by banks as per the anticipated harvesting and marketing period for the crops for which a loan has been granted.
• The term loan component will be normally repayable within a period of 5 years depending on the type of activity / investment as per the existing guidelines applicable for investment credit.
• Financing banks at their discretion may provide longer repayment period for term loan depending on the type of investment.

Security

👉🏻 Security will be applicable as per RBI guidelines prescribed from time to time. Security requirement may be as under:

• Hypothecation of crops up to card limit of Rs. 1.6 lakh as per the extant RBI guidelines.
• With tie-up for recovery: Banks may consider sanctioning loans on hypothecation of crops upto card limit of Rs. 3.00 lakh without insisting on collateral security.
• Collateral security may be obtained at the discretion of Bank for loan limits above Rs. 1.6 lakh in case of non-tie-up and above Rs. 3.00 lakh in case of tie-up advances.
• ⭐️ RBI raises limit for collateral-free agriculture loans to ₹1.6 lakh from ₹1 lakh
• In States where banks have the facility of on-line creation of charge on the land records, the same shall be ensured.

Other

• Besides the mandatory crop insurance, the KCC holder should have the option to take benefit of any type of Assets Insurance, Accident Insurance (including PAIS), and Health Insurance (wherever product is available) and have premium paid through his KCC account. Premium has to be borne by farmers/bank according to the terms of the Scheme. Farmer beneficiaries should be made aware of the insurance cover available and their consent (except in case of crop insurance, it being mandatory) is to be obtained, at the application stage itself.
• Interest Subvention/Incentive for prompt repayment as advised by Government of India and / or State Governments. The bankers will make the farmers aware of this facility.
• One-time documentation at the time of first availment and thereafter simple declaration (about crops raised / proposed) by farmer from the second year onwards.

Scale of Finance

• The cornerstone of agriculture credit is the Scale of Finance (SoF) being fixed for every crop at the district level which forms the basis for determining the eligible credit for each crop and farmer. The limit for KCC is also decided based on the scale of finance, crop grown and area cultivated. The system of fixing scale of finance is in vogue for the last several decades with the Cooperative Bank in the district taking the lead for the same.
• As of now the SoF is fixed by the District Level Technical Committee (DLTC) ^{NABARD 2019}, the meeting of which is convened by the District Central Cooperative Bank (DCCB) and generally chaired by the CEO of the DCCB/senior most official present.
• DLTC will call for proposals from its members/ all major stakeholders and prepare the agenda for the meeting based on the inputs received from the stakeholders. On approval, the proposals will be forwarded to the State Level Technical Committee (SLTC).
• The SLTC would review the proposals based on the district level conditions, the characteristic of district /agro-climatic zones etc., and approve the same. The SoF so approved would then be circulated among all stakeholders for its adoption. For wider circulation it may be placed prominently on the website of the SLBC, StCB, DCCB, SCBs and RRBs. Efforts may be made by all concerned to use technology to maximum possible extent to ensure speedy and transparent process for fixing the SoF.

Interest Subvention (2 or 2 + 3)

• Interest Subvention is provided by Government of India for short-term crop loans of up to 3 lakh rupees payable within a year. After interest subvention, a farmer needs to pay 4 per cent of the interest (gets 5 per cent interest subvention) if he/she pays regularly on time, while if interest is not paid on time 7 per cent is charged after providing a subvention of just 2 per cent.
• For timely repayment additional incentive of 3 % is applicable. ^{NABARD 2019}
• Interest Subvention is provided if a KCC loan is taken from a public sector bank, private sector bank, regional rural bank, small finance bank or a cooperative bank. Interest Subvention Scheme is implemented by RBI and NABARD.
• The Interest Subvention Scheme (ISS) has been operational since 2006-07. Under this scheme, the farmers can avail concessional crop loans of upto Rs. 3 lakh at 7 per cent rate of interest. It also provides for an additional subvention of 3 per cent for prompt repayment within a period of one year from the date of advance.
• The interest subvention will be given to Public Sector Banks (PSBs), Private Sector Banks, Cooperative Banks and Regional Rural Banks (RRBs) on use of own funds and to NABARD for refinance to RRBs and Cooperative Banks.
• To provide relief to the farmers affected by natural calamities, the interest subvention of 2 per cent will be provided to Banks for the first year on the restructured amount.
• DAY-NRLM has also a provision for Interest Subvention of 2.00 % for SHGs for maximum of 3 lakhs per SHG.

Direct Benefit Transfer (DBT)

• The Government of India has introduced Direct Benefit Transfer (DBT) system for fertilizer subsidy on Pilot Basis with effect from October, 2016.
• Under the proposed fertilizer DBT system, 100 per cent subsidy on various fertilizer grades shall be released to the fertilizer companies on the basis of actual sales made by the retailers to the beneficiaries.